Fed rate hike view hurts Asia FX sentiment; yuan exception: Reuters poll

Thu Mar 19, 2015 4:23am EDT
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By Jongwoo Cheon

SINGAPORE (Reuters) - Bearish bets on most emerging Asian currencies increased in the last two weeks, with short positions in the Singapore dollar at a six-year high, as the Federal Reserve moved closer to raising interest rates, a Reuters poll showed on Thursday.

Short positions on the Chinese yuan CNY=CFXS, however, were reduced on perceptions that the central bank would support the currency, according to the survey of 12 currency analysts from banks and asset management companies conducted between Tuesday and Thursday.

The Fed dropped a reference to being "patient" on rates from its policy statement on Wednesday, opening the door wider for a hike this year. At the same time, the central bank downgraded its economic growth and inflation forecasts, signaling it is in no rush to raise borrowing costs.

That caused investors to scale back expectations of a rate hike in June. Top Wall Street firms now see a Fed lift off in September.

While the Fed is expected to raise rates, central banks in Asia are likely to ease policy to tackle economic sluggishness and deflationary pressures.

Pessimistic bets on the Singapore dollar SGD=D3 soared to their largest since January 2009.

The Singapore dollar fell to its weakest since July 2010 last week as a slowing economy and inflation added to expectations that the central bank may ease monetary policy further in April.

The Indonesian rupiah's IDR=ID short positions hit the highest since January 2014 as the currency fell to its weakest since August 1998.   Continued...

The United States Federal Reserve Board building is shown behind security barriers in Washington October 28, 2014.  REUTERS/Gary Cameron